Tomorrow, April 27, 2020, will mark the one-month anniversary since the biggest stimulus package in U.S. history was passed by Congress and signed into law by President Trump. The $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act wound up providing $500 billion in loans to distressed industries, nearly $350 billion for small business loans, and $260 billion for an expansion of the unemployment benefits program.
However, the detail that really has Americans abuzz is the $300 billion set aside for direct stimulus payments. These payouts, officially known as Economic Impact Payments, began hitting banks accounts via direct deposit during the week ended April 17, and will continue to do so in paper check form through September.
While folks are clearly eager to receive their stimulus check and put it to work, the fact remains that myths and misconceptions shroud these payouts. Here are 10 of the most pervasive myths concerning coronavirus disease 2019 (COVID-19) stimulus checks that need to be put to bed.
Myth No. 1: Everyone is going to get a check
No, not everyone is going to get a stimulus check. By my own calculation, there could be tens of millions of adults that fail to see a dime from the largest stimulus package in history. High-income earners (defined as adjusted gross income (AGI) above $99,000 for single filers, $198,000 for married filing jointly, and $136,500 for head-of-household) are ineligible, along with dependents aged 17 and older and non-citizens with no legal pathway to citizenship. People who owe child support are also unlikely to receive a stimulus check, or at least the full amount.
Myth No. 2: If you qualify, you'll get the maximum $1,200 stimulus payout
The maximum payout for single filers is $1,200, with couples filing jointly able to net as much as $2,400. In order to land this maximum payout, a taxpayers' AGI would need to be below $75,000 as a single filer, $112,500 as head-of-household, and $150,000 for couples filing jointly. Making more than this level will result in a reduced payout, or, if higher than the AGI's noted in the previous myth, no payout at all.
Just a quick reminder that the Internal Revenue Service (IRS) is using your most recent tax filing (either tax year 2018 or 2019) to determine your eligibility.
Myth No. 3: Every dependent nets the household an extra $500
One of the great perks of the CARES Act is that qualifying children aged 16 and under equate to an additional $500 payout. However, this doesn't mean that all dependents net a household in question an extra $500. Dependents aged 17 and up (e.g., high school seniors and college students), which includes senior citizens who are dependents, don't qualify.
Myth No. 4: Social Security beneficiaries won't get an Economic Impact Payment
Although there had been some very real concern early in the discussion process on Capitol Hill that seniors who hadn't filed a tax return wouldn't receive a stimulus check, this misconception has been plainly debunked. The IRS can reference a Social Security beneficiaries' payout record to determine eligibility, as well as direct deposit their Economic Impact Payment to the same bank account where their Social Security benefits are currently going.
Myth No. 5: I have to apply for a stimulus check to receive one
While not 100% false, there's a very high probability that you won't have to do a thing to be eligible for a stimulus check. As long as you filed a federal tax return in either 2018 or 2019, the IRS has the information it needs to determine your eligibility for a payout.
The exception to the rule is if you haven't filed a tax return in years due to your income being lower than the annual standard deduction ($12,200 for single filers in 2019, or $24,400 for married filing jointly). If you fall into this camp, a little extra legwork may be required. You can go onto the IRS' website and supply the tax agency with some basic information in order to get your stimulus money.
Myth No. 6: If I receive unemployment benefits, I can't get a stimulus check
While the labor market disruption caused by COVID-19 is unprecedented, a bit of good news to report is that your unemployment benefits and stimulus money are two completely separate entities. The IRS is merely focusing on your AGI in either the 2018 or 2019 tax year and doesn't care whether or not you're currently receiving unemployment benefits. As long as you or your family meet the eligibility requirements, you'll receive an Economic Impact Payment.
Myth No. 7: I'll owe federal tax on my stimulus check
Now, here's some great news every stimulus check recipient can get behind. Since Economic Impact Payments are a 2020 tax credit, they don't count as income. Therefore, you're not going to be taxed on your payout, whatever that amount comes out to. This provides even more incentive to put this capital to work.
Myth No. 8: If I make too much money in 2020, I'll be forced to pay back my stimulus check
Another pervasive misconception is that if you earn considerably more in 2020 than you made in either the 2018 or 2019 tax year that was used to determine your eligibility, you're going to need to pay back some or all of your stimulus money. This is false. Since the tax credit is based on your most recent tax filing, your 2020 AGI is of no consequence to the IRS.
However, if your 2020 earnings are significantly lower than 2019, to the point where your 2020 AGI would have entitled you to a larger stimulus check, you can apply for the difference next year when filing your tax return for the 2020 calendar year.
Myth No. 9: This stimulus check money will offset my federal tax refund
Although the Economic Impact Payment is a tax credit for the 2020 tax year, it has absolutely no bearing on what you'll potentially be refunded by the federal government when you prepare your taxes next year. Remember, your stimulus money isn't counted as income, therefore it's not going to affect your tax return (or refund) one bit.
Myth No. 10: If I do X, I can get my check before everyone else
In my best Dwight impression from the television show The Office, "False!" While there are numerous claims that if you do "X" you'll receive your stimulus check faster, the reality is that there's very little you can do to expedite the process. The IRS is paying out direct deposits first, followed by paper checks in staggered increments based on AGI, beginning with the lowest-income taxpayers. This means some couples or previous non-filers may not see their stimulus money until September. Providing your direct deposit info to the IRS may expedite when you'll receive your check, but it's not a guarantee.